1. In order to fund her retirement, Michele requires a portfolio with an expecte
ID: 2631717 • Letter: 1
Question
1. In order to fund her retirement, Michele requires a portfolio with an expected return of 0.11 per year over the next 30 years. She has decided to invest in Stocks 1, 2, and 3, with 25 percent in Stock 1, 50 percent in Stock 2, and 25 percent in Stock 3. If Stocks 1 and 2 have expected returns of 0.08 and 0.11 per year, respectively, then what is the minimum expected annual return for Stock 3 that will enable Michele to achieve her investment requirement?
2.The beta of M Simon Inc., stock is 1.3, whereas the risk-free rate of return is 0.09. If the expected return on the market is 0.13, then what is the expected return on M Simon Inc?
Explanation / Answer
1. RETURN OF STOCK 3 SHUD BE 0.14
.2. expected rate of return=0.142
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